Do You Validate?

Innovation architect, artist, social scientist, investor and author of the bestselling “Startup Equation,” Ja-Naé Duane has been written up by Associated Press, NPR, Boston Globe, and Business Week. Mostly recognized for her diverse skill set and unwavering commitment to improving the quality of life for our global community, Ja-Naé was nominated as one of New England’s “Most Innovative Leaders of 2007″.

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A pivot here, a pivot there, we see pivots everywhere. Obviously, we all accept the possibility that we’ll need to pivot when we start a company. But as leaders, how do we know when to pivot, and how do we validate the decision?

Let’s break down the process by reviewing a big pivot you may have missed: CVS Caremark becoming CVS Health. We’re familiar with many of the tech company pivots over the years (e.g., Odeo becomes Twitter). But there are good reasons to take a closer look at this pivot and understand how they validated their decision.

In this case, the pivot wasn’t about technology. It was about who CVS wanted to be as a company and changing customer perceptions by adopting a socially conscious position. It’s a tricky pivot. This analysis follows a template I created to help entrepreneurs work through a potential pivot. Download your free Validation board here.

So what was the big change? Two things:

In 2014 the CVS drugstore chain stopped selling tobacco products.

The parent company changed its name from CVS Caremark Corp. to CVS Health.

Taking tobacco products off their shelves meant a loss of $2 billion in annual sales or a little less than two percent of total revenue. The name change, while seemingly small, supported an overall strategic change. CVS wasn’t just drug stores or pharmacy benefit providers. They wanted to be seen as a healthcare company.

What logic might explain how they reached this particular pivot?

It Starts With a Hypothesis

CVS, Walgreens and other retail chains have all explored ways to provide healthcare services in addition to products. But if you want people to associate your brand with healthcare, one disconnect might be seeing tobacco products behind the checkout counter.

Think about it from your company’s perspective. If you’re debating whether to pivot, what customer problem do you think you solve? Now, in context, how easily can people connect their problem to your solution? What’s getting in the way?

Define Your Core Assumptions

CVS wanted to customers to see them as a trusted healthcare provider. They made two assumptions in support of that goal:

Tobacco consumption will drop regardless.

No one associates being healthy with tobacco.

These assumptions sound obvious, but imagine if both proved false. CVS would invest a lot of time and money reconfiguring stores and rebranding without gaining the end goal. As you work through a potential pivot, consider your current strategy. What assumptions have you made that, if invalidated, could break your business?

Test Your Assumptions

CVS tested their riskiest assumption in a big way. While the transition to no tobacco was scheduled to wrap up in February 2015, they sped up the schedule. Over Labor Day weekend in 2014, they removed all tobacco products and replaced them with smoking-cessation products. Almost a year later, CVS revealed that same-store sales were down, and that, at least initially, the benefits were “more qualitative than quantitative.”

What’s the lowest cost way for you to test your riskiest assumption? Based on what you learn from the tests, you can assess if you’re headed in the right direction with your pivot or need to reconsider.

CVS wanted people to think of its business differently and needed a powerful and memorable pivot. It didn’t change technology or create a new app. CVS formed a hypothesis, then defined and tested their assumptions.

Today, the experiment plays out and provides entrepreneurs with insight on making a smart pivot.

To learn more about pivoting your startup, checkout The Startup Equation, which provides a holistic approach for building a business and managing innovation, both from scratch and within an existing organization.

Ja-Nae DuaneInnovation architect, artist, social scientist, investor and author of the bestselling “Startup Equation,” Ja-Naé Duane has been written up by Associated Press, NPR, Boston Globe, and Business Week. Mostly recognized for her diverse skill set and unwavering commitment to improving the quality of life for our global community, Ja-Naé was nominated as one of New England’s “Most Innovative Leaders of 2007.